Community Voices: Cathedral City and Palm Springs Need to Consider the Consequences of Corporate Homeownership

Is homeownership destined to become something from another era, like video tapes, 8-track players and phone books?

Homeownership by individuals in California has declined by 9% since 2005. Today, fewer than 55% of Californians live in homes they or their families own. So, who owns these homes? Increasingly, single-family homes are being purchased by corporations, institutional investors and real estate trusts. In 2021, investors bought 24% of all single-family homes sold nationwide. Five states had the highest share of investor purchases: Georgia (33%), Arizona (31%), Nevada (30%), Texas (29%) and California (29%).

And now corporate home ownership is about to come to the Coachella Valley—in a big way.

In Palm Springs, the City Council will soon consider a proposal by Pacaso, which is essentially a company that sells time shares of single-family residences. The Palm Springs Planning Commission recently held a study session to consider a proposal to build 140 town homes that will all be rentals. In Cathedral City, a proposal by a limited liability company to build 52 homes—with attached accessory dwelling units that will all be rental units owned and controlled by the LLC—is making its way through the planning process.

Historically, homeownership has been a valuable tool for individuals to build generational equity and wealth. For most individuals, their homes are their single most important element of an investment portfolio. Corporate involvement in housing makes it difficult for first-time homebuyers to secure a home. Individuals often must save to build up a down payment, and then secure financing from a lending institution for a mortgage. Corporations can make all-cash offers for homes because they raise billions of dollars in capital from hedge funds, pension funds, wealthy individuals and institutional investors.

Corporate homeownership can also have a negative impact on the quality of life in a neighborhood. Corporations have to account to their investors. They are, therefore, more concerned about the bottom line than they are about a community.

Local government income is also impacted by corporate homeownership. Under Proposition 13, the property tax is re-calculated every time a home is sold. Privately owned homes typically turn over once or twice each decade, resulting in increased property taxes. Corporations hold homes for 10 to 20 years for maximum depreciation benefit. Local government expenses for services such as police and fire, parks, and libraries are subject to inflation without any prospect of increased income from corporately held homes.

With pending decisions, the city councils in Palm Springs and Cathedral City have an opportunity to engage their constituents in a discussion of the impacts of corporate homeownership on our neighborhoods and communities. These discussions will help define the next era of homeownership in our valley and determine if we are a place where we prioritize equity and access to the American dream of homeownership.

Rich Gordon is a Palm Springs resident and a former member of the California State Assembly, where he represented the Silicon Valley in San Mateo and Santa Clara counties.